The Korea Fair Trade Commission has begun sanction procedures against Myeongnyundang, the operator of Myeongnyun Jinsagalbi, which offered high-interest loans to franchisees using low-interest policy funds.
The Korea Fair Trade Commission (FTC) said on the 10th that it determined Myeongnyundang's conduct violated the Fair Transactions in Franchise Business Act and sent a review report to Myeongnyundang containing a corrective order, a penalty surcharge, and an opinion to file a complaint. A review report is a document in which an examiner records the illegality identified during the investigation and the examiner's opinion on measures; after the respondent receives it, the final decision is made following the submission of the respondent's opinion.
Myeongnyundang was investigated by the Korea Fair Trade Commission (FTC) from September last year to April this year after allegations arose that the company, after borrowing at low interest rates from the Korea Development Bank (KDB) and others, used the funds to lend at high interest rates to franchisees through a lending company it established.
The Korea Fair Trade Commission (FTC) viewed that Myeongnyundang forced transactions by lending funds related to opening franchises at a uniform high interest rate through a lending company owned by a major shareholder without considering the franchisees' financial conditions, and by even designating the interior company. It also found that while the company directly provided credit to franchisees, it omitted the lending transactions by entering "not applicable" for "credit provision and brokerage" in the franchise disclosure document.
The Korea Fair Trade Commission (FTC) determined that Myeongnyundang's conduct violated Article 12(1)3, Article 12(1)2, and Article 9(1)1 and 2 of the Fair Transactions in Franchise Business Act. Accordingly, the Korea Fair Trade Commission (FTC) proposed measures to impose a corrective order and a penalty surcharge and to request that a complaint be filed against Myeongnyundang as a corporation and Co-CEO Lee Jong-geun.